UAE Transfer Pricing Risk Scorer

An FTA transfer-pricing review never starts from a single figure. It starts from the pattern of your business: who you trade with, how big the group is, whether the paperwork exists, and whether the numbers look commercially rational. This scorer mirrors that pattern by testing the five risk factors an examiner would notice first.

Answer each question honestly. A cross-border transaction with a related party is the classic trigger — management fees, intercompany loans, IP royalties, and goods moving between group entities all count. Domestic related-party transactions count too: the arm's-length principle does not stop at the border, and domestic dealings between connected persons are still controlled transactions. The AED 3.15 billion revenue question tests whether Country-by-Country reporting obligations arise for the group. The documentation question tests the single cheapest thing you can do to reduce risk — prepare the paperwork. The losses question tests the scenario examiners find hardest to accept: a company that loses money year after year while paying its related parties.

Your score is an exposure reading, not a verdict. A score of 0 does not mean the FTA will leave you alone, and a score of 5 does not mean you are doing anything wrong — it means you carry the combination of factors that makes a transfer-pricing enquiry most likely, and that you should have your documentation and your pricing analysis ready.

Transfer-pricing documentation comes in three layers, and the scorer's flags map to them. The master file describes the whole group: what it does, where it does it, how value moves between entities, and what the group's transfer-pricing policies are. The local file describes your entity: its transactions with related parties, the method used to test them, and the comparables supporting the price. Together they are how you demonstrate, in one package, that your dealings follow the arm's-length principle.

Country-by-Country reporting (CbCR) is the third layer, and it only arises for large groups: at AED 3.15 billion of consolidated group revenue, the group reports where its revenue, profit, tax and people sit, country by country. The scorer's CbCR flag is set purely by that revenue question — if your group is below the line, the flag stays off.

The practical point is sequencing. Documentation is prepared before an enquiry, not during one. If the scorer flags documentation exposure — related-party transactions with no paperwork — the fix is a transfer-pricing study: functional analysis, method selection, and benchmarking against independent comparables. That study is also the only thing that can move your actual risk, because a score is just an illustration while a documented arm's-length position is evidence.

This scorer measures the presence of risk factors. It does not — and cannot — measure your real transfer-pricing position. Whether your intercompany prices are at arm's length is a question for a full transfer-pricing study: functional analysis, method selection, and comparables benchmarking. No five-question tool can substitute for that.

It also does not model the FTA's documentation expectations for your specific facts. Master file and local file expectations follow the Authority's transfer-pricing guidance, and they vary with the size and complexity of your transactions. The scorer's documentation-exposure flag tells you related-party transactions exist — it does not tell you which documents the FTA would ask for, or by when.

Finally, it does not touch adjacent questions: whether your foreign related party creates a permanent establishment, how customs valuation interacts with your transfer prices on imported goods, or whether a particular transaction should have been disclosed somewhere else. Those are adviser questions.

If your score is 2 or more, the sensible next move is a transfer-pricing health check: list every related-party transaction, confirm the pricing method behind each one, and check what documentation already exists. A health check is cheaper than a full study and it tells you exactly where the gaps are.

If the CbCR flag is set, your group's tax team needs to confirm who files the Country-by-Country report and where — the obligation sits at group level, and the local entity's job is usually to notify and to hold the supporting data.

If you are loss-making alongside related-party payments, prepare the commercial story before anyone asks: why the losses arose, what changed, and how the related-party pricing reflects the functions your entity actually performs. Examiners accept losses they understand; they challenge losses nobody explains.

And if your score is 0 today, diary a re-test. Groups change — a new intercompany loan, a management fee, a restructuring — and transfer-pricing risk arrives with the transaction, not with the year-end accounts.